The ability to conduct bank and securities business on-line with unparalleled speed and efficiency has won over Americans.

Selling insurance on the Internet is the next great challenge for the e- commerce industry.

Lots of people use the Internet to check stock quotes or pay off the mortgage. How many are clicking on to Web sites to shop for life or homeowner insurance policies?

Signs show that the adoption of e-business strategies in the insurance industry is growing, though at a slower rate than in brokerage or banking.

On-line insurance sales face obstacles, including the industry's complex regulatory environment, its dependence on people-based distribution channels, and its perception of lukewarm consumer demand.

Still, the industry should be a little further along in using the Internet. Most studies show that consumer demand exceeds what insurance companies are delivering.

For example, an October report by Forrester Research projected that nearly $1 billion of premium revenue would be collected on-line in 2001 and more than $4 billion in 2003 but that most of this would be collected by banks and brokerage houses, not insurance companies.

Automobile and simple life products are expected to be the predominant products sold directly over the Internet. Moreover, Web-influenced sales, in which buyers research and select products on-line but go off line to buy, are expected to dwarf on-line sales for the next few years.

Commercial insurance presents several opportunities for e-business-based transformation.

Today it takes two to three months to write a policy and one to two months to settle a simple claim. Partly as a result, the industry's expense ratio is nearly 40%.

Improvements would require collaboration among risk managers, brokers, insurers, and reinsurers. Commercial insurance customers are demanding improved service as a condition of doing business. Companies are starting to adopt e-business solutions that address those problems.

A study by the International Foundation of Employee Benefit Plans highlighted a trend among employers and group benefits administrators to demand on-line capabilities from their insurance providers.

The trend was summarized by the attitude of a midwestern telecommunications company, where "on-line capabilities are always a point of discussion" when reviewing insurance proposals and "everyone we interviewed and selected had on-line capabilities."

Driven by customer demand, a significant portion of the financial services industry is already using e-business to help it evolve to an integrated financial services model.

Opportunities exist as well for insurance companies to serve customers on-line. Demand is highest among commercial customers and intermediaries. This environment presents both opportunities and risks to insurance companies.

The first question insurance companies need to answer is simple: Where to start? Possible starting points vary for insurers, depending on their lines of business, current distribution channels, core competencies, business strategies, and e-business readiness.

The following is a road map that focuses on delivering near-term business value:

Understand your customers. Power is shifting to the customer as a result of freely available and readily accessible information. Successful companies will precisely understand customers' buying behaviors, channel preferences, value, propensity to buy, need for new offerings, and reactions to branding initiatives.

Improve business efficiency. E-business-enable what you already have. Provide another access point for customer service while leveraging the legacy systems investment you've made.

Put your product information or forms on a Web server for your customers to view and print. Web-enable your account balance inquiry system. Give risk managers on-line access to the loss statistics, claims summary reports, or payment status systems that you already have.

Enhance customer value. Strengthen your value proposition by using e- business to supply higher-value services. Examples might include analytical tools and tailored investment recommendations in addition to pension account access; on-line access to detailed adjuster notes, photographs, or loss-control experts in addition to claims summary reports; or centralized, on-line group administrative services for group customers.

Build intermediary relationships. Start by making your company easy to do business with, and offer services that help your intermediaries become more successful.

A good first step is to supply services such as e-mail access; timely lapse notifications; electronic application submission; and on-line access to product information, work in process, and commission information.

Then move on to offering high-quality leads; access to experts; and tools for client management, territory management, campaign management, effective selling, and back-office management.

Re-engineer for industry leadership. Restructure your business processes for e-business. Distribute your mutual funds or annuities electronically. Offer integrated financing and insurance at car dealerships. Dynamically build customized solutions for specific risk exposures.

Give your insurance agents an integrated platform for dealing with banking, investments, insurance, and replacement goods. Develop niche products designed to be sold on the Web to specific people.

E-business poses enormous challenges but also presents astonishing opportunities to insurance companies.

In the emerging e-business economy, equity in bricks and mortar no longer determines success. In the next millennium, the winners in insurance will be organizations that use intellectual resources to create unique value propositions for their customers. Mr. Pintar is manager of e-business solutions, IBM Global Insurance Industry, Armonk, N.Y.

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